Raising financially savvy kids should be a priority for every parent. There are two things we need to have before we can even begin thinking about having a good life and they are health and wealth. Parents spend a lot of time making sure that their kids are healthy. We also need spend some time to ensure that our children acquire the skill set or behavioral traits necessary to manage their wealth. It is never too early or too late to start, where ever you are at the moment is the best place to begin. Today I want to give discuss four immediate steps that parents can start using to begin the process of raising financially savvy children. These are general actionable steps which have to be tailored to meet the specific characteristics of each family, they serve as a reference point for beginning the process.
The first step that parents can take is to make sure that their children understand the difference between a need and a want. People who are good with managing their money have this distinction imprinted into their core. Okay, maybe that I am being a little too dramatic, but you understand what I mean. Understanding and implementing this concept is essential for financial success and this holds true for anyone at any age and with any amount of money. The first book in The Kidonomics Series (TKS) teaches this fundamental concept. Parents and grandparents often report back to me that after reading Shopping Adventure to their kids or grand-kids, it helped them keep this concept top of mind and they found themselves being more conscious when they went shopping. You can reference https://thekidonomicsseries.wordpress.com/2016/04/05/making-mini-money-manager-2/ for some specific activities that you can start doing today to teach your child this core concept.
The second immediate step is to loving say NO. This is never a pleasant task for any parent. It always causes discomfort either to one or both parties involved. In a recent poll conducted by Parents magazine they found that 42% of their readers admitted that their child is spoiled and 80% of these readers know that this will affect the child in the long run. There are many reasons why parents spoil their kids. When it comes to money, however, the two main reasons are either because the parents themselves were raised this way or they had very little growing up and now feel obligated to give everything to their children. In both cases the result is the same, it fosters a sense of entitlement. This entitlement attitude does not serve the child when he or she enters the “real’ world. Saying no to a child may be the kindest thing a parent can do for them in the long run (even though it may not seem that way when you are actually saying no).
In the case of less affluent families, it may be easier to say no, because there is no other alternative. Even in such a case, however, saying no has to be done lovingly and with care. This is because we don’t want the child to grow up with a lack mentality. It is a good idea to refrain from telling the child that you can’t afford it or you don’t have the money for it. Even though it may be true, it’s best not to be so forthright with them. Words are very powerful and we have to use them to empower the child not place limitations on them. It is necessary to find alternative ways to say no. I purposely did not use the term scarcity in any of the TKS books. The reason is that I did not want to put a limiting concept into impressionable minds. It is important that we find a way to reframe limitations into opportunities to be creative and resourceful.
The third actionable step is teaching kids how to prioritize and make decisions and give them plenty of opportunity to practice. The ability to rank things and task in order of importance is crucial for life in general and essential for effective money management. Children need to understand that basic needs such as food, clothing and shelter are priority. These must be taken care of first and then other things can be considered. Additionally, it is important to develop a child’s decision making skills. Ineffective decision making skills can be paralyzing and financially draining. Children have to learn how to make good choices for themselves. Parents need to provide opportunities to practice prioritising and decision making. Perhaps if the child is old enough, they can participate in making some household decisions such as helping choose furniture or picture frames for instance. Even the younger ones can get involved, just the act of inclusion will go a long way both in teaching them valuable lessons while also create a stronger bond with the parent.
And finally we come to the fourth step and most important step. Parents have to LEAD BY EXAMPLE. It is not enough to say do as I say and not as I do. Parents are a child’s first teacher and we have the responsibility to demonstrate the behaviour we want them to adopt. The chances of you raising a financially savvy child increase exponentially when you become financially savvy yourself.